Russia’s President Vladimir Putin has declared this morning to invade Ukraine to protect its Russian citizens and interests. The prospect of Russia invading a country who has the support of the US and other world super powers is an unthinkable event that could potentially lead to large scale military action. Further, a war between Russia and Ukraine would likely trigger economic sanctions against Russia which will certainly have global repercussions. In response, global stock markets are suffering, with the US S&P 500 currently down about 20 points so far today.
Economic reports for the day are mainly positive. Personal income was reported to be .3% higher this month, and consumer spending increased .4%. Both of these are positive reports for our economic growth, and would normally have a tendency to push the stock market higher. We are still spending more than we make, which is a double edged sword for our economy. Of course spending is good, but debt has long term negative economic consequences.
PCE (Personal Consumption Expenditure) was reported at a year over year 1.2% increase this morning, showing that inflation remains tame. This is an extremely low number, and very positive for helping keep interest rates low. Also, ISM (Institute for Supply Management) was reported this morning, showing a better than expected reading of 53.2 vs. 52.9 estimate. This shows that manufacturing is a bit stronger than expected.
Friday will be the big jobs report showing the number of new job creations in the month of February. With the last two coming in extremely low, it increases the chances of a strong report this time. New job creations have been the leading influencer of mortgage rates. Therefore, if the report comes in higher than expected, mortgage rates will likely increase. Should the report again disappoint the market, rates will likely be held down.
Mortgage bonds will show volatility this week as a potential battle in Ukraine heats up, the stock market struggles, and with the jobs report on Friday. Therefore, although we are suggesting a carefully floating bias, we need to watch closely as things could change quickly.